How does cryptocurrency gain value has been a burning question at the present time. The thought is obviously valid as cryptocurrency is just an online asset with no signature from the central bank’s governor. And, this same thought kept us awake for several nights.
Later on, we decided to get the answer to satiate our upset mind and share that with you. What we got from our research follows below for you in detail.
There are a number of things that determine the value of cryptocurrency and obviously those are not so much comprehensible. But, our brainstorming has made them transparent for you. Here we go!
The first and the foremost thing, as per our study, is the concept of a certain cryptocurrency. Since there are already 6500 cryptocurrencies in the market, it's not easy for a new currency to gain some value.
Therefore, the currency must be introduced with an exclusive concept that none has before. The more diversified purpose it serves, the more its value increases to the users.
Let us introduce this segment with an interesting incident in Japan. In April 2017, the Japanese govt. declared Bitcoin to be legal all over the country. Within that particular day, the price of that currency in Japan rose by 3pc.
On the contrary, when the Chinese govt. Imposed an injunction on the use of cryptocurrency, the value fell to a great extent. The rate for Ethereum fell by 20pc and for Bitcoin fell by 15pc.
In short, the value partially depends on the legalization of the currency.
Supply refers to the number of mining of coins and the selling inclination of the owners. On the contrary, demand denotes the utility of the currency.
The easier it can be bought, faster it can be sold with the least fees and the more acceptance it has, the demand increases.
The more the supply and demand, the more value a certain digital currency gains over the time.
As we have told earlier, there has always been a tough competition among the cryptocurrencies, so it’s not possible to impose value upon a specific one especially the new ones without the support of a large community.
There must be a large group of people supporting the currency on social media and promoting it there.
The more support and promotion it gets, the more attraction it gets thus increasing the demand automatically.
Have you heard about the illegal hoarders of consumer products? What do they actually do? They buy a large scale of products from the real producer at a considerable rate and then hoard them not releasing them in the market.
Eventually, the demand for those items rises high and when the buyers are ready to pay a huge sum, the hoarders release the hoarding gradually.
Same is the case with cryptocurrencies. When the big investors invest a lot to buy them and then hoard them for a long time, the value goes up automatically.
There is a popular theory of economics that says - when demand surpasses supply, the value rises. This concept is somewhat similar to our immediate previous one.
Instead of a few big investors buying a huge sum of currencies at a time, when a large group of people buy a small or moderate amount of that currency, the output is the same.
There will be an increasing demand thus the value will go up significantly.
No, we are not talking about the inflation of cryptocurrencies, in fact there is no inflation of crypto as its amount is limited. Whatever, we are actually referring to the inflation of the usual fiat currency.
When fiat currency inflates a lot, people tend to invest in digital currency as they can earn more fiat currency later selling the crypto.
Doesn’t the thought of why cryptocurrency never associates inflation cross your mind? If it does and you are keen in learning, this section explains that for you.
Can you remember the theory of economicas that we explained to you in one of the aforementioned sections? Well, that is the answer actually.
To be more specific, when there is a limited number of cryptocurrency in the blockchain, people’s urge for it will never fade. And this urge will raise the price.
This is why the founder of Bitcoin has limited the number of coins, which is 21 million. That means there will be not more than 21 million Bitcoins.
Why does a feature mobile set cost significantly less than a smart mobile? The easiest and simplest answer is the variation in the cost of production, right?
Same thing happens with the value of cryptocurrency. The more manufacturing cost is, the more value it associates. This is why Bitcoin is so expensive whose production requires skilled hands, a heavy-weight computer and a lot of electricity.
Who wants to invest in a vulnerable sector? None, right?
Similarly, none is willing to invest in a particular cryptocurrency that prones to be hacked now and then. Investors feel discouraged thus the demand for that currency goes down.
This is why, we cannot but mention again Bitcoin still possesses such a huge fan following. It has been able to prove its security to the investors.
Have you grown an interest in investing in cryptocurrency yet not sure which the most profitable currencies are right now? Here we have listed the most influential cryptocurrencies in today’s world with respective value against USD.
In the end, we believe that your long-sought answer to the question how does cryptocurrency gain value is revealed. And, you also know the currencies which guarantee you a secure interest in no time. But then, before you invest your hard-toiled penny, learn the pros and cons of cryptocurrency investment well.